In
a lot of cases I was informed that the commercialista had contacted the
local Agenzia delle Entrate and they had confirmed that this is
correct. So, who was I to challenge it? However, I still believed that
it was incorrect. Of course, no-one challenged it because it also meant
the difference between being paying a 15% flat tax rate on that income
or progressive income tax rates starting from 23%. However,
during the summer the client I referred to above contacted her
commercialista, who did not accept this definition, but in fact
presented an 'interpello' issued by the Agenzia delle Entrate (an
interpello is basically an 'opinion' from the Agenzia delle Entrate on a
specific case that is presented to them) from May 2020 regarding a UK
personal pension holder. In the interpello (which you can find HERE - the interesting part starts on page 7) it indicates that a UK personal pension should not be considered a 'previdenza complementare',
but should actually be subject to progressive tax rates in Italy. This
is quite an eye-opener because if this is the case, then it flies
against the information gained from various commercialisti. I should add here that the interpello
is merely an indicative judgment in this particular case and is by no
means a definitive decision for everyone holding a UK personal pension
and resident in Italy. However, the fact that the AdE has gone to the
trouble to write this gives us a pretty good idea into their thinking,
should they choose to follow it up. What to do? So
what should you do if your commercialista has advised you to
declare your UK personal pension as a 'previdenza complementare' and you
are now benefitting from the 15% flat tax rate? I would take the interpello
to them and ask their opinion based on the new evidence. Or you may
choose to do nothing. Whatever your choice or the advice from the
commercialista, we are now a little more enlightened into the
thoughts of the Agenzia delle Entrate on this topic.
Brexit
It
is worth noting here that Brexit is almost upon us and whatever your
opinion as to how the UK will exit, a messy unfriendly exit may bring a
few matters to light. In particular, the interpello also states
that pension funds which 'could' be deemed to qualify are those which
conduct business cross border and meet the pension rules of both EU
states in which they are operating. I don't know of a UK personal
pension provider that does this anyway, but the mere fact that the UK
is in the EU may gloss over some of these finer points. But then, what
will happen, once the UK leaves the EU?
Which leads nicely on to the next problem that Brits are now facing in Italy.  Bank account closures for UK citizens living in the EU By
now, I am sure you have read the headlines saying that a number of UK
banks are contacting or have contacted their customers living in the EU
to close down their UK banks accounts, potentially leaving them without a
UK account. To date the main culprits are the Lloyds banking group,
which includes Halifax and the Royal Bank of Scotland, Coutts and
Barclays.
I am afraid to say that the rumours are true and I know of a number of people who have been contacted already.
The culprit, of course, is Brexit.
These
banks have now had to weigh up the benefits of retaining bank account
holders in the EU post Brexit, because once they are banks out of the EU
market place they will be forced to adhere to individual EU
jurisdictional regulations, as well as UK regulations, if they want to
continue to service clients in any EU state. Clearly, for a bank which
has no intention of developing business in Italy (in our case), nor does
it have a sufficiently large client base in Italy already, then they
are going to need to look to close down activities in those
jurisdictions to ensure they do not fall foul of the regulators.
It
is interesting that, in contrast, HSBC Bank has not decided to pull
from its EU markets because it has sufficient activities which take
place throughout the EU. I have also heard that Nationwide is also not
pulling any activities just yet.
For many clients this is going
to be a very tough time, as you could lose a bank account in the UK
when you may still have bills being paid, or you simply use it when you
are in the UK. To make matters worse, because you are no longer a
resident in the UK, you can no longer request an account from another UK
banking group.
Many of the groups will also offer their
international bank account services, of which the majority are based in
the Isle of Man. This is also not a good idea because the Isle of Man
is not in the UK, but is a UK dependant territory and is deemed a fiscal
paradise. It is currently on the grey list of 'could do better' in
global fiscal transparency with the EU. It is anyone's guess what will
happen after the UK leaves the EU, but it is certainly not beyond
imagination that the EU will look to impose punitive tax measures for
anyone holding accounts in UK offshore jurisdictions. Let's not forget
that it only came off the black list in 2015!
So, without any
other options perhaps one of the better solutions is to look at an
Italian bank which can provide a GBP account. I have used Fineco for
years, and recommend it to many clients. They offer a EUR current
account linked to a GBP and USD account and transfers of cash between
accounts are made at spot rate, with no fee. It might be a solution, but
will be no consolation for losing your UK bank account. Once again,
another downside of Brexit for those of us that have chosen to live in
the EU.  Why you should never leave more than €100,000 (or currency equivalent) in your bank account Still
on the subject of banking, does the sound of a bad bank sound appealing
to you? A bank that is so bad that it can take all the bad from all the
other banks and just keep it there and away from us all. It sounds like
a great idea in theory.
On the 25th September the EU had a
consultation round table event with a number of European bank leaders,
asset management groups and government officials to discuss the
possibility of creating a European-wide 'bad bank' which would take all
that bad debt (debt which cannot be paid back for one reason or
another) and which is currently sat on the balance sheets of a lot of
European banks, particularly Italian ones and other Southern European
states. The idea being that this bad debt could be whisked away from the
banks, freeing them up from the worry of having to manage this debt and
giving them the liberty to start lending once again,
supposedly to individuals and businesses which pose a better credit risk
and would be more reliable at paying the debt back.
So far so
good. I would not argue at this point. It seems like a good idea to help
stimulate economies especially after the COVID-19 crisis.
But morally, should we accept this?
This
is the argument put forward by a number of EU functionaries who argue
that the banks are, once again, getting another bail out at the cost of
the taxpayer. You and I.
To remedy this, the 'Bank recovery and
resolution directive' (BRRD) has proposed that certain parties should
also have to meet some of that cost as well as the EU/taxpayer itself.
Those parties have been identified as the shareholders of the bank,
holders of the banks bonds and lastly, the one that should interest us
all: deposit holders with more than €100,000 or currency equivalent held
in any banking group. Does this mean that the EU, to fund the COVID-19
crisis, could make a cash grab on deposit holders with more than
€100,000 or currency equivalent, in their accounts? At this point it is
only a proposal, but I shall be watching this space carefully.
Based
on this news, there is probably no better time to look at your
financial plans closely especially if you are holding high levels of
cash in any banks around Europe.  NS&I slashes rates! You
might be someone who has been investing in NS&I products in the UK
as a diversifier to your other holdings, or maybe just someone who likes
to 'play it safe' with your money.
National Savings and
Investments, NS&I, are backed by the UK government, and due to the
COVID-19 crisis, the government has now moved to slash rates on all
national savings products to the point where you have to ask yourself,
'are they worth it?.'
The rate on on the Direct Saver account has
been slashed from 1% interest per annum to just 0.15%.Income Bonds,
which have for a long time been considered a best buy, have been slashed
from 1% interest rate to just 0.01%pa.
Not only that, but the
average interest rate on Premium Bonds (with the chance to win the big
prize) will fall from 1.4% to just 1% and the amount of prizes issued
will be reduced significantly.
If that is not enough, the Bank
of England is also toying with the idea of introducing a negative base
interest rate. If they apply that to the NS&I products, then you
will be effectively paying the government to hold them.
Time to consider alternatives to protect your capital?
I hoped you have enjoyed this 'return to normality' E-zine. I
will be sending out more information in the coming weeks and months to
keep you up to speed with the goings on in the financial world and how
that might impact our lives in Italy. If any information from this
E-zine has interested you and you would like to get in contact, you can
reach me on gareth.horsfall@spectrum-ifa.com or on cell phone 333 649
2356 by call, sms or whatsapp. | 
